In Its Record New $6.3 Billion Fund, Insight Venture Partners Leaders Were Their Own Biggest Backers

Insight Venture Partners’ model of combining venture deals with private equity-style buyouts means it’s not a surprise that its newest fund would be one of the biggest the venture capital industry has ever seen. But there’s a key twist to Insight’s $6.3 billion Fund X: The firm’s general partners are its largest investors.

“Hopefully it’s a sign to our investors that we believe in our own strategy,” says Midas List investor Deven Parekh, one of Insight’s managing directors. “The vast majority of our collective net worths is in the fund.”

The fund, which gives Insight at least $23 billion in assets at 23 years old, is an umbrella one that covers the full scope of Insight’s activity in the private software sector. Insight operates from momentum-driven venture capital investments, sometimes checks of about $15 million or $20 million, through to larger-size growth-stage checks to private tech companies, as well as buyouts in which the firm looks to install its own leadership to spur growth.

Larger-size firms come with their own pressures to generate corresponding cash returns. According to Parekh, Insight’s ability to continue raising larger funds is in part due to a strategy of concentrating behind emerging winners in the portfolio. Pluralsight and Smartsheet, two recent portfolio initial public offerings, both initially took smaller venture checks from the firm, he says.

Insight is known in the venture capital industry for its relatively large team of operational and investment professionals who support its partners and portfolio companies, including a team called “Insight Onsite,” which provides in-house sales, staffing and consulting support to the portfolio. Insight’s currently invested in more than 150 software companies, having exited more than 225 by acquisition and more than 40 by IPO over the years, the firm says.

Its $6.3 billion fund is one of the larger in a wave of billion-plus funds announced in recent months. Hanging over the entire industry is Softbank’s $100 billion Vision Fund, but traditional name-brand firms have increased their fund sizes as well. Index Ventures raised $1.65 billion earlier in July, while IVP announced a $1.5 billion fund last September. Even bigger, Sequoia Capital raised a $6 billion growth fund in April that reportedly could swell to $8 billion.

Insight Venture Partners’ leaders are the biggest investors in its new record-sized fund.

insightpartners.com

But such large funds can come with complications. Decades-old stalwart NEA raised $3.3 billion in June 2017, slightly bigger than another raised in 2015. But with companies remaining private and not necessarily generating liquidity to investors who poured large sums into its funds, NEA is reported to be setting up a separate fund to buy shares in its own portfolio, in part to give liquidity to its main fund’s investors.

At Insight, Parekh says that relatively consistent exits across the firm’s venture and buyout portfolios have meant that the firm hasn’t sold secondary shares in its investments to date. Insight has also kept its check sizes roughly consistent, the investor adds. “We will have a larger number of portfolio companies than some,” says Parekh. “But we also take seriously the ability to deliver the value-add that we have to all of them.”

Insight’s greatest challenge with such large funds instead may be the temptation to add more bureaucracy to a staff already large enough to make it popular with other firms looking to poach talent. Parekh says “that’s the big question I stay up to think about,” but the investor argues that his firm’s velocity of deals makes it an attractive place to work even as it requires processes to handle such complex funds. “The amount of responsibility that we are able to give junior folks, they can get the same amount of experience in two years as they would somewhere else in five or six,” he says.